Why More Corporate Agendas Are Reflecting Social Issues

In the weeks since the Parkland school shooting, big U.S. companies have found themselves in a familiar position: pressured to act on controversial social and political issues where government won’t.

It’s a trend currently manifested by firms cutting ties to the National Rifle Association and efforts by large investors to reduce exposure to gun-makers. But with U.S. politics more polarized than ever, moving forward on issues that Washington has failed to tackle is increasingly routine for corporate America, from coastal tech giants like Alphabet Inc. to heartland icons including Walmart Inc.

Whether that means more generous benefits for working mothers, support for politically vulnerable groups, or intensifying efforts to fight climate change, companies are stepping into a void once filled by political rhetoric and leadership. “We have to do it ourselves,” said Jeff McDermott, managing partner of Greentech Capital Advisors, a New York investment bank that focuses on sustainable businesses. “The cavalry isn’t coming.”

There are a variety of reasons companies are taking on the additional costs — including the bottom line. Consumers, employees, and to some extent even shareholders are newly insistent that companies adopt progressive policies. Some 60 percent of consumers in the U.S. and U.K. say their decisions have been influenced by a company’s politics, according to research by public relations firm Weber Shandwick; among them, buying products to show their support is an increasingly popular response.

‘Millennials Care’

“Millennials care, and there’s more of them now,” Rick Goings, chief executive officer of Tupperware Brands Corp., said in an interview at the World Economic Forum in Davos, Switzerland in January. “There’s going to be a number of CEOs who really want a double bottom line, so profits are one line and the other is the good you do.”

The aftermath of the Feb. 14 attack in Parkland, Florida, in which a teenager armed with an AR-15 assault rifle shot and killed 17 people, has illustrated how swiftly public pressure can push companies to act. Even as Washington debates policy responses, including arming teachers, companies including Delta Air Lines Inc. and Hertz Global Holdings Inc. ended discounts for NRA members. Dick’s Sporting Goods Inc., Kroger Co.’s Fred Meyer chain and Walmart have adopted restrictions on the kinds of guns they will sell and to whom.

The world’s most powerful investors are also getting on board. Blackstone Group LP has asked outside fund managers for information on their exposure to the firearms industry. BlackRock Inc. said it’s exploring ways to remove gun-related investments from portfolios if clients request it.

BlackRock, the world’s largest asset manager, has been in the vanguard of pushing companies for better behavior. In January, Chairman Larry Fink wrote an open letter to CEOs urging them to consider that “a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth.”

The notion that a company could have a social agenda alongside a corporate strategy isn’t new, but it’s taken on new urgency. What’s different now, executives say, is the potent combination of social media and younger consumers who are reluctant to purchase products from, or work for, companies that don’t align with their values.

Environmental Issues

Polling data suggest that millennials, who will make up 50 percent of the global workforce by 2020, are more attuned to social and environmental issues than their elders. A 2016 study of young employees by Boston-based Cone Communications found that 76 percent consider a company’s social and environmental commitments when deciding where to work, compared with 58 percent of the workforce as a whole.

To attract millennials, “you have to articulate who you are, what you stand for, what’s your purpose, what do you care about,” Bill Thomas, the global chairman of KPMG International, said on a panel in Davos.

“If it’s not greater and broader than simply the bottom line,” he added, “then you are going to leave yourself at [their] mercy.”

Beyond recent moves on guns, more corporations are adopting practices that a decade ago would have been associated with crunchy, socially-oriented companies like Patagonia Inc. Earlier this year T-Mobile US Inc. announced a 160-megawatt wind-power contract that will bring the proportion of electricity the wireless provider receives from renewable sources to 60 percent, moving to 100 percent in 2021. It joins the likes of Mars Inc. and Nike Inc. in RE100, a group of global companies with similar goals.

“The reason that you see more companies acting like Patagonia did a long time ago is because they’ve realized the value,” said Natasha Lamb, managing partner of Boston-based sustainable investment firm Arjuna Capital. “Companies rarely move on an ethical mandate alone. There’s a business case for change.”

LGBT Progress

One of the most dramatic areas of progress has been in encouraging acceptance of lesbian, gay and transgender employees. In the most recent Corporate Equality Index, a survey by the Human Rights Campaign that measures the workplace inclusion of LGBT staff, 14 of the 20 largest companies, including Ford Motor Co., General Electric Co. and Apple Inc., received 100 percent ratings.

Last March the North Carolina legislature repealed parts of the state’s “bathroom bill,” which would have restricted the use of public restrooms by transgender people, after PayPal Holdings Inc. and Deutsche Bank AG canceled planned investments in protest.

American companies haven’t, of course, experienced a mass conversion to altruism: Many corporate pledges are as much marketing as substance, and few believe that voluntary actions taken by businesses can substitute for meaningful government action. “Sustainability efforts are oftentimes really happening on the sidelines,” said Marjella Alma, CEO of Datamaran, a London-based firm that provides information on sustainability.

Take diversity, especially in the top ranks of large companies. With the retirement last month of Ken Chenault, the longtime CEO of American Express Co., there are just three African-Americans leading companies in the Fortune 500. Despite high-profile ascensions like those of Mary Barra, at General Motors Co., women run fewer than 30.

Replacing government policy with individual corporate initiatives also presents problems of inconsistency. When standards are voluntary, many companies will inevitably decline to adopt them, leaving workers — particularly those with fewer skills and less ability to take their services elsewhere — vulnerable to lowest-common-denominator policies.

For example, law firms and financial services companies make up one-third of the 609 companies that received a perfect score on LGBT protections from HRC. The list included just two firms in mining and metals and one in tobacco. “The lack of consistent, explicit federal protections,” the organization said, creates “major barriers to full equality.”

Hearts, Minds

The risk is also that corporate efforts remain marginal, focused on winning hearts and minds, or that they’re temporary. Walmart and Starbucks Corp. recently announced more generous parental-leave policies and higher wages, a cost increase that’s easier to justify when economies are growing briskly, as in Europe and the U.S.

The gun debate illustrates the limits of corporate action. Even if Wall Street begins to shun manufacturers, firearms will remain widely available until government action makes them harder to buy.

That effectively outsources the political process, said Adil Najam, dean of the Frederick S. Pardee School of Global Studies at Boston University, with a perverse effect on national policy and the fundamentals of democracy: “When a company makes the decision, those first three words of the Constitution, ‘We the People,’ are replaced by ‘We the Customer.”